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4. Potential opportunities
4.1 The CAP Health Check may provide opportunities to make changes that are of benefit in Scotland. In addition to meeting EU wide objectives of simplification, grasping new market opportunities and preparing for new challenges, opportunities in Scotland could include finding innovative ways to:
- maintain environmental benefits of set-aside, following its abolition;
- address concerns with the current SFP system;
- secure the sustainability of livestock farming and crofting in LFAs.
Maintain environmental benefits of set-aside
4.2 Set-aside was originally introduced as a supply control measure. Following recent increases in global demand for cereals, and shortfalls arising from poor crops and increased use of arable land for biofuels, the EU reduced set-aside to 0% for 2008/09 and is now proposing its abolition.
4.3 The Scottish Government has commissioned a study to assess the environmental impact of 0% set-aside. This is not yet complete, but results from the first part of the work 11 suggest that farmers in Scotland intend to plant about 75% of their set-aside land by spring 2008. This would reduce the area of set-aside land in Scotland from 60,000 hectares to 15,000 hectares; much of the remaining set-aside land is likely to be field margins rather than whole fields. Concern has been expressed about the environmental impact of these changes, which are likely to have an adverse impact on habitats for particular species (such as corn buntings) and on water quality where riparian zones are cultivated. Terrestrial breeding birds are one of Scotland's national performance indicators.
4.4 Possible mechanisms for maintaining the environmental benefits of set-aside include introducing amendments to cross-compliance requirements and/or to agri-environment measures under the SRDP. The cross-compliance measures could, for example, require that riparian buffer zones and buffer zones around fields remain uncultivated. In its CAP Health Check proposals, the EC has suggested new GAEC requirements that could help to protect watercourses by establishing buffer strips along water courses and retaining landscape features (such as hedges, trees, ponds and ditches). It would also be possible to design one or more agri-environment sub-measures to address this issue, and to provide guidance that would highlight this as a priority in the assessment of proposals coming forward under the SRDP.
Help new entrants
4.5 Helping new entrants to farming is a priority for the Scottish Government and the Tenant Farming Forum has been asked to investigate barriers to new entrants. In their report 12, the Forum has recommended that arrangements be put in place as soon as is practicable to ensure that all new entrants have access to SFPs (or whatever support arrangements emerge from the CAP Health Check).
4.6 The national reserve provides a mechanism for achieving this. At present the national reserve operates on a UK basis. There is very little money in the national reserve because it was established, following the 2003 CAP Reform, to deal with certain situations caused by the switch from the coupled to decoupled subsidy regimes. This included provision to offer SFP entitlements to new entrants who started farming between 2002 and 2004. Parish averages were used to determine entitlement values per hectare.
4.7 Before reopening the national reserve to new entrants, consideration will need to be given to the implications for other SFP recipients of offering entitlements to new entrants, and the rules that would apply. If, for example, SFPs were reduced by 0.5% in 2009, 1% in 2010 and 1.5% in 2011, then this would provide about £2 million in 2009, £4 million in 2010 and £6 million in 2011. Assuming an average entitlement of £4000 per new entrant, this would allow an additional 500 new entrants to be awarded entitlements each year. The allocation of entitlements would probably need to be made on a competitive basis to avoid risking overspend. It would also be necessary to define new entrants. This definition would need to include the date when they started farming, their farming qualification and the way they obtained their land so that entitlements would only go to "genuine" new entrants. Difficult questions would need to be addressed: for example, should sons or daughters of farmers be eligible if they do not take on their parents' land? In addition, agreement will need to be reached with other countries in the UK about splitting the national reserve so that any SFP scale-back in Scotland remains in Scotland.
Address concerns with current SFP system
4.8 Following the 2003 CAP Reform, and the decisions taken in Scotland about how to implement it, a number of anomalies have arisen and given rise to public comment. These include the fact that, under the historic model, existing producers in previously unsupported sectors did not receive SFP entitlements in respect of those activities. There has also been concern about the fact that those who no longer farm are able to buy or rent so-called "naked acres" in order to activate entitlements - and that cross-compliance does not apply to the land they previously farmed since it no longer attracts SFP. Elsewhere in Europe, there are a range of additional concerns - for example about recipients of flat rate SFPs who own some land but cannot be regarded as "genuine farmers".
4.9 A number of these problems arise because of the way in which the European law is written. The EC have sought to address some of these concerns through its proposals to increase flexibility and clarify definitions. Hopefully this will help, although there may still be situations where it is not possible to reconcile competing interests. The proposal to give flexibility to use the national envelope to help with restructuring and development may also be helpful (although this could not be combined with similar measures using the national reserve). It should also be noted that a number of these concerns, as well as the issue with new entrants, should disappear following any transition to flat-rate area payments because the area payments would be available to the current occupier of the land.
Secure sustainability of livestock farming and crofting in LFAs
4.10 As shown in the recent evaluation of LFASS13, sustainable farming and crofting in LFAs is dependent on significant levels of support. At present, there is evidence of livestock being removed from the hills, particularly in north west Scotland, because farming activity is relatively less competitive 14. LFASS is an important measure, providing over £60 million per year to some 13,000 beneficiaries, and payment is conditional on active farming. However, the CAP Health Check may offer another potential tool for securing sustainability of farming and crofting in LFAs, through increased flexibility in the national envelope.
4.11 At present, national envelope funding cannot move between sectors. Thus, the SBCS is funded exclusively through top-slicing of SFPs associated with the beef sector. However, the EC's CAP Health Check proposals would make it possible to top-slice up to 10% of all SFPs, with no constraint on moving money between sectors (although only 2.5% could be coupled with production). This would allow the national envelope in Scotland to be increased from about £18 million to over £40 million, offering a potential opportunity to provide decoupled support for livestock farmers and crofters in LFAs. The Report of the Committee of Inquiry on Crofting 15 recommends using extended national envelope provisions to address disadvantages for small farmers and crofters in crofting areas.
4.12 SAC have recently carried out an evaluation of SBCS16, against its objectives of (i) protecting or enhancing the environment and (ii) improving the quality and marketing of agricultural products. This study concluded that, despite current levels of support, net margins for suckler cows are negative across a range of farming types, suggesting that suckler cow production systems would not be sustainable in the long run. It also suggested that the dual objectives of the scheme are difficult to reconcile.
4.13 Other potential opportunities arising from increased flexibility in use of the national envelope are to top up entitlements in areas subject to restructuring and/or development programmes; and to support certain risk management measures, namely crop insurance for natural disasters and mutual funds for animal and plant disease. Thus, there is potential to consider further how the proposal for mutual funds might be used in relation to cost and responsibility sharing. For example, if a fund were established to provide financial compensation to farmers for economic losses caused by a disease outbreak, then it might be partially funded from the national envelope.
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